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Asset AllocationOctober 29, 2021

Microsoft Threatens Apple’s Market Cap Supremacy

Both once seen as has-beens, the two tech giants draw closer as the software firm picks up speed.

In the annals of turnarounds, Apple and Microsoft are legendary. Following their late-20th century heydays, the two looked like has-beens. Now, Apple has the world’s largest market capitalization, and Microsoft is hot on its tail.

The market rivalry took a fresh turn this week with a sharp gain in the software giant’s share price amid good earnings news, as the iPhone maker stumbled on the profit front. As Bespoke Investment Group points out in a research note, “Microsoft is suddenly challenging Apple for the title of world’s largest company.”

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As of Thursday’s close, Apple had a market cap of $2.52 trillion versus Microsoft’s $2.43 trillion. The once-wide spread between the two has been narrowing.

Apple on Thursday reported a slight drop to earnings per share (EPS) to $1.24 for its September-ending quarter, despite a 29% revenue climb, amid supply constraints. The company, whose stock price rose 2.5% in yesterday’s trading, reported its results after the market closed Thursday. Then the price dipped 3.5% in after-hours trading.

Microsoft stock has had better fortunes following its post-close Tuesday earnings report, which logged a 48% boost in profits and 22% increase in sales, thanks to its booming cloud business. The shares rose 4.6% over the next two days.

In late December 1999, just before the era’s tech bubble popped, Microsoft had a market cap of $615 billion, far overshadowing Apple’s $15.9 billion, according to Bespoke. At that point, Apple’s allure from the 1970s and 1980s had dimmed. Microsoft had a long fallow period after the 2000 dot-com crash. The two had previously clashed over Apple’s contention that Microsoft stole Apple interface elements to create Windows 2.0. Apple lost a court suit over that charge.

Following the triumphant return of co-founder Steve Jobs to Apple (he had been booted in 1985), the company enjoyed a surge of innovation—the iPod, the iPad, and eventually the iPhone—that by 2010 propelled its market value past that of Microsoft. With a stagnant stock, Microsoft’s struggles continued for another five years until its Azure cloud service and Office 365 kicked in.

The two have traded the market value lead ever since. This past January, Apple (then at $2.4 trillion) held its widest lead over Microsoft ($1.74 trillion), Bespoke says. Since that peak on Jan. 25, though, Microsoft has been rapidly gaining.

“It will only take another small move higher on a relative basis for Microsoft to eclipse Apple’s market cap at this point,” Bespoke declares.

Brown Leads Ivies for Third Year in a Row, as Columbia, Harvard Lag Behind

Endowment investment returns range from 32.3% to 51.5% for the fiscal year ending June 30.

By Michael Katz

Brown University’s endowment returns have topped its Ivy League rivals for the third straight year, while the Columbia University and Harvard University endowments find themselves lagging behind their rivals despite earning historic returns of more than 30% each for fiscal year 2021.

Princeton University, which is the only Ivy League school that hasn’t yet reported its 2021 endowment performance, said it will announce results later this fall.

Brown’s 51.5% return cruised past the other Ivies, beating out the next highest performance by 5 percentage points and raising the fund’s market value to $6.9 billion from $4.7 billion at the end of fiscal year 2020.

Brown was followed by Dartmouth College’s endowment, which reported a return of 46.5% for the fiscal year that ended June 30, to raise its portfolio’s market value to $8.5 billion from $6 billion last year. The endowment also reported annualized returns of 12.8% over the past 10 years.

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Cornell University followed Dartmouth, returning 41.9% to boost its total asset value to $10 billion from $7.2 billion in 2020—its largest gain in more than three decades. Close behind was the University of Pennsylvania’s endowment, which generated an investment return of 41.1% for the fiscal year, growing its portfolio’s assets by $5.6 billion during the fiscal year to $20.5 billion.

Yale’s endowment was next, reporting a 40.2% investment return net of fees, to earn more than $12 billion in gains and rise to $42.3 billion. And pulling up the rear were Harvard and Columbia’s endowments, which returned 33.6% and 32.3%, respectively.

Harvard lifted its market value to $53.2 billion, an increase of $11.3 billion from the previous fiscal year, and the largest sum in its history, while the market value of Columbia’s portfolio increased to $14.35 billion, from $11.3 billion last year. The two schools also fell behind non-Ivy League rivals Massachusetts Institute of Technology (MIT) and Stanford University, whose endowments returned 55.5% and 40.1%, respectively for fiscal year 2021. MIT’s performance raised its asset value by $9 billion to $27.4 billion, while Stanford’s returns translated to $12.1 billion in net investment gains as the value of the merged pool rose to $41.9 billion.

The median return for US college and university endowments for the year, as preliminarily reported by Cambridge Associates, is 33.4%.